In this issue:

Michigan budget crisis worst since World War II

Medicaid top fiscal concern for state legislatures

Obesity rates grow among nation’s elderly

Editorial: In 2005 and beyond, will Michigan care for its poor?

Michigan Budget Crisis Worst Since World War II

Michigan is facing its worst state budget crisis since World War II and is plagued by structural deficits that likely will require even more dramatic spending cuts — potentially to Medicaid — in 2005 and beyond, the highly regarded Citizens Research Council of Michigan told MHA members.

Even if the state posts relatively healthy 3 percent revenue increases every year for the foreseeable future, spending pressures in the state budget will exceed total revenues by more than $300 million a year, the CRC’s Tom Clay said in a recent presentation to the MHA Legislative Policy Panel. Clay and state government fiscal analysts are already pegging the 2006 state budget deficit at nearly $1 billion, with Medicaid spending accounting for about half of the shortfall.

“In Michigan we will not grow our way out of our current budget problems,” Clay said. “Cost increases, particularly in corrections and Medicaid, are outpacing revenue growth. Those spending pressures also come at a time when tax cuts and declining manufacturing jobs are eroding our revenue base even further. Michigan’s state budget spending pressures are outpacing the economy, and our antiquated revenue structure cannot keep up with spending demands.”

Sikkema: Pare Medicaid Spending

In a news release late last year, state Senate Majority Leader Ken Sikkema (R-Wyoming) said Michigan can no longer afford current Medicaid spending levels. Sikkema said Republicans intend to balance the 2005 and 2006 budgets with spending cuts and no tax increases. To get there, Sikkema vowed to slash Medicaid services that are not mandated by the federal government, which could include cuts to prescription drugs, adult home help, inpatient psychiatric services for those under 21, and physical therapy, among other things.

“We’ve severely cut spending in higher education, community colleges and local government services while maintaining spending in other areas just to pour money into Medicaid,” Sikkema told reporters in Lansing. “This cannot be sustained in the 2006 budget. We must address the Medicaid program, including what is mandated by the federal government and how we have expanded services beyond the basic level.”

Gov. Jennifer Granholm and the new legislature will officially begin working in February on the 2006 fiscal year state budget, which takes effect Oct. 1, 2005.

Michigan Medicaid Caseload Sets Record

Clay agreed that Medicaid spending is contributing to the state’s budget mess, noting that spending is up 40 percent because caseloads are up more than 30 percent in the past four years. Today a record number of Michigan residents — more than 1.4 million — are receiving Medicaid health care services. “It’s not so much because the costs of health care services are going up, but because far more people are now receiving Medicaid health care services,” he said.

Clay said that because of soaring caseloads, about an additional $67 million will be needed to cover Medicaid costs in the current 2005 state budget. However, the entire 2005 budget appears to be about $450 million short of approved spending, so it is not clear if Medicaid funding will be increased or potentially slashed. If caseloads continue to grow, about $600 million will be needed to cover Medicaid spending in 2006. “Even if we have good revenue growth for 2006, the state budget will be about $1 billion short.

Granholm Opposes Cuts to Medicaid

Gov. Granholm and other Democratic leaders said they oppose Sikkema’s proposal to cut Medicaid services for the state’s most vulnerable residents.

“Anybody who's suggesting we cut seniors off prescription drugs, cutting the mental health services we provide to those who are mentally ill, cutting children off Medicaid, those are the only optional services we have,” the governor told Gongwer News Service. “Cutting people off of health care is not what we're about as a state, and it certainly is not what I'm about as governor.”

Looking into the future, the state must make fundamental reductions in the programs it currently funds or determine how to permanently boost revenues. Without structural reforms, state budget spending will continue to outpace revenues, requiring massive budget cuts on an annual basis.

Back to Top

Medicaid Top Fiscal Concern for State Legislatures

Medicaid and other health care cost issues are the top fiscal concerns for state legislatures across the nation in 2005, found a new survey released by the National Conference of State Legislatures. The survey of legislative fiscal directors in all 50 states is available at www.ncsl.org.

Back to Top

Obesity Rates Grow Among Nation's Elderly

Michigan is infamously known for having citizens who are overweight, smoke too much and don’t get enough exercise. A new federal study says Michigan is not alone.

During the last four decades, the percentage of older Americans who are obese doubled from 18 percent in 1980 to 36 percent in 2002, boosting the elderly’s risk for developing diabetes, certain cancers, osteoarthritis and disability — and driving up health care costs. The growing number of obese senior citizens adds about $30 billion to $40 billion a year to the nation’s health care bill, concludes the report by the Federal Interagency Forum on Aging-Related Statistics. The report is available at www.agingstats.gov.

Back to Top

In 2005 and Beyond, Will Michigan Care for Its Poor?

Spencer Johnson, president Michigan Health & Hospital Association

There is no sugarcoating the bleak status of the state budget. In 2005 and 2006, Gov. Granholm and state lawmakers must identify about $1.4 billion in new revenues or spending cuts to keep the budget balanced. This is the worst budget crisis facing the state since World War II, the Citizens Research Council of Michigan has noted.

As state elected leaders try to clean up this massive budget mess, the following question will be asked: In 2005 and beyond, will Michigan continue to provide health care services for the poor, the elderly, the blind, and for low-income single mothers? Simply stated, will Medicaid health care services be protected or slashed?

It’s a fair question, because close to half of the state budget shortfall can be traced directly to Medicaid spending. As the CRC has demonstrated, because of job losses and other factors, more than 1.4 million Michigan citizens are today receiving health care through Medicaid. As a result of this booming Medicaid caseload, spending on Medicaid is increasing as well.

Gov. Jennifer Granholm and other Democratic leaders have already voiced strong opposition to cutting and gutting Medicaid. The governor has also stated her strong reluctance to raise taxes.

On the Republican side, Senate Majority Leader Ken Sikkema (Wyoming) and newly elected House Speaker Craig DeRoche (Novi) have vowed to oppose any tax increase to bail out the budget. In fact, Sikkema has already publicly declared that Medicaid spending can’t be sustained. Michigan’s Medicaid program appears to be at a fiscal and political crossroads. Perhaps more accurately, Medicaid appears to be in the political crosshairs. If Medicaid services are cut, human consequences will certainly result and the state’s already dubious health status will continue to erode. Is that the Michigan we all want?

Back to Top